Future Foundations: towards a new culture in the NHS

Future FoundationsTowards a new culture in the NHS

By Bill Moyes and Paul CorriganEdited by Henry Featherstone

£10.00ISBN: 978-1-906037-71-4

Policy ExchangeClutha House10 Storey’s GateLondon SW1P 3AY

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Policy Exchange

Future Foundations: towards a new

culture in the NH

S

Given its importance healthcare in England has

inevitably been the object of reform of different

ways of organising, funding and managing

hospital, community and primary care services.

But are Government Ministers the best people

to run the NHS? And should Parliament seek to

hold Ministers to account for every last detail of

healthcare provided in each and every hospital in

every Parliamentary constituency?

The policy of creating Foundation Trusts was

designed to create a new set of structural

relationships within the NHS. The development of

the new structure was, amongst other things, an

attempt to create a new culture. But the old culture

of tight central control – the one that NHS managers

and civil servants feel safest in - still remains

dominant within the Department of Health.

In this pamphlet, Bill Moyes and Paul Corrigan, the

architects of Foundation Trusts, argue that the NHS

needs to adopt more of the changes that allowed

Foundation Trusts to flourish. They suggest 5 key

changes that must happen if we are to have any

chance of creating the culture that is needed in

Government to enable autonomy to flourish, and

with it creativity and innovation.

FutureFoundationsTowards a new culture in the NHS

Bill Moyes and Paul CorriganEdited by Henry Featherstone

PX Future Foundations:Layout 1 26/2/10 15:20 Page 1

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Ehrman, Robin Edwards, Virginia Fraser, George Robinson, Andrew Sells, Tim Steel, Alice Thomson,

Rachel Whetstone and Simon Wolfson

© Policy Exchange 2010

Published by

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ISBN: 978-1-906037-71-4

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Contents

About the Authors 4

Executive Summary 6

1 Introduction: why do the public want Ministers 11

to think they have to run the NHS?

2 The NHS as a corporate entity 20

3 Challenging and changing NHS corporate 28

4 Foundation Trusts – the beginning of the end 32

of the NHS as corporate?

5 Does the system work? 38

6 Towards a new culture 45


About the Authors

Bill Moyes

Until recently, Bill was the Chairman and Chief Executive of

Monitor, the independent regulator for Foundation Trust hospitals,

which he set up in 2004. Before that he was Director General of

the British Retail Consortium from 2000 to 2004. He joined the

Civil Service fast stream in 1974, and spent the first ten years of his

career in Whitehall, including three years in the Economic

Secretariat of the Cabinet Office. Between 1983 and 1994 Bill held

a variety of posts in the Scottish Office, culminating in his post of

Director of Strategy and Performance Management for the NHS in

Scotland. He joined the Bank of Scotland Group in 1994, initially

on secondment to establish a health care PFI team offering finan-

cial advice and raising debt and equity in the capital markets. Bill

became a Director of the British Linen Bank in 1996, and Head of

Infrastructure Finance for the Bank of Scotland in 1998. He has a

PhD in theoretical chemistry from Edinburgh University, and is

married with one son.

Paul Corrigan

For the first 12 years of his working life he taught at Warwick

University and the Polytechnic of North London where he taught,

researched and wrote about inner city social policy and community

development. In 1985 he left academic life and became a senior

manager in London local government and in 1997 he started to

work as a public services management consultant.

From July 2001 he worked as a special adviser to Alan Milburn

first and then John Reid, the then Secretary of States for Health. At

the end of 2005 he became the senior health policy adviser to the


About the Authors | 5

Prime Minister Tony Blair. Between June 2007 and March 2009 he

was the director of strategy and commissioning at the London

Strategic Health Authority.

Since then Paul has been working as a management consultant

and an executive coach. He is working with a wide range of public

services organisations and think tanks.As a columnist for the Health

Service Journal and with his own blog “Health Matters” he has

continued to argue the case for reform of the NHS.

Henry Featherstone

Henry joined Policy Exchange in November 2008 and is Head of

the Health and Social Care Unit. He has worked in the NHS as a

junior doctor and, before joining Policy Exchange, in Parliament for

a number of leading Conservative politicians. He read Medicine at

Leeds University and has a BSc in Management and Law from the

University of London.


Executive Summary

Why is it proving so difficult to design and operate a healthcare,

education or prison system that provides high and improving qual-

ity but also provides value for money when these are requirements

that in other parts of the economy would be taken for granted?

Under successive governments, and given its importance, healthcare

in England has inevitably been the object of reform of different ways of

organising, funding and managing hospital, community and primary

care services. But are Ministers the best people to run the NHS; decide

how it should be organised, or where funding should go, and where

facilities and services are located? And should Parliament seek to hold

Ministers to account for every last detail of healthcare provided in

each and every hospital in every Parliamentary constituency?

These perceptions and expectations that are heaped upon the

NHS have sprung up from the way it has evolved over the last 60

years. Healthcare is a much more expensive business today than was

foreseen when the NHS was created.

The ideology of the NHS – as a mutual insurance fund – that we

all pay for ourselves and for each other in a large risk pool is a

concrete part of the way in which the public think and feel about

the NHS. But in the practical terms of experiencing NHS care there

is no experience of cost to the public. And in terms of demand for

more care and treatment, the money comes from somewhere else,

so, of course we all want more.

These growing cost implications have been felt by HM Treasury,

who have sought to exert their control over public expenditure all the

way down through the many levels of the NHS. This has generated a

culture in the Department of Health that has been simultaneously

tightly centrist and controlling, and deliberately opaque.


Set against this background, it is easy to see why the creation of

Foundation Hospitals was one of the most bitterly fought battles of

the NHS reform programme underTony Blair. Foundation Hospitals

were to be truly independent of day-to-day Ministerial control, yet

they were still owned by the NHS as public benefit organisations.

Many people felt that, if you separated the ownership of the hospi-

tal from the elected Cabinet politician, the

NHS could no longer really be a publicly

paid for health service.

Foundation Hospitals would, of course,

remain accountable to Parliament, but

accountability would be wider and more

direct with local involvement through a

board of governors recruited from its

patients, staff and the public it serves.The full system of Foundation

Trust powers and governance contains the balance of incentives,

sanctions and accountability that Ministers rightly judged necessary

to give confidence that they would meet the needs of patients,

improve quality and efficiency, respond to their commissioners, be

called to account locally and not take risks they could not manage.

And this system works well: the most recent annual health check for

2008-09 (published by the Care Quality Commission in the

autumn of 2009) showed there were 38 trusts that were rated

Excellent for use of resources and Excellent for quality of service

and 36 of those were Foundation Trusts.

The policy of creating Foundation Trusts was designed to create

a new set of structural relationships within the NHS. The develop-

ment of the new structure was, amongst other things, an attempt to

create a new culture. The old culture – the one that NHS managers

and civil servants feel safest in – however remains dominant within

the Department of Health.

There is still a belief in the minds of Ministers, and indeed

Parliament, when reacting to public concern, that they can order

Execu*ve Summary | 7

““Are Ministers the bestpeople to run the NHS; decidehow it should be organised, orwhere funding should go, andwhere facilities and servicesare located?””


Foundation Trusts to conduct exercises in hospital deep cleaning, or

intervene in great detail in tragic episodes such as that at Mid-

Staffordshire. In a crisis, or when pursuing an objective they regard

as politically important, Ministers and Parliament still assume that

that the only approach is to exert managerial authority and issue

instructions. The pressure to ‘do something’; even when you don’t

have the power to ‘do something’ seems to be irresistible.

There are five key changes that must happen if we are to have any

chance of creating the culture that is needed in Government to

enable autonomy to flourish and with it creativity and innovation.

Developing real competitionFirst, true competition needs to be made a real part of the system,

so that competitive pressures are brought to bear on managers and

clinicians in order to incentivise them to improve safety, quality and

the responsiveness of the services they offer. This competition needs

to be between NHS providers and between NHS providers and

providers from other sectors. Ministers should see themselves as the

“patient’s friend” commissioning top-quality services on their

behalf and driving out mediocrity, rather than, as now, the

guardians of the status quo.

Developing a pricing framework that drives changeSecond, we need to start using the tariff to drive change. The poten-

tial of a national tariff has not been remotely explored. Properly

used, the tariff could define what the Government proposes to

spend on different components of a care pathway, rather than

simply reflecting average costs of different treatments as it does

now. To achieve its full potential for improving services, the system

for setting the tariff needs to be independent of political manipula-

tion and properly resourced.

8 | Future Foundations


Foundation Trusts believing in and using the autonomythat they haveThird, NHS healthcare providers need to begin to relish their auton-

omy and to use it to develop their institutions. They ought to be

well-placed to acquire weak providers and turn them into successes,

and in the process build chains of strong institutions and services

that are capable of resisting central control and rising above the

pressures this seeks to exert. But so far these changes have been

slow to emerge.

An industry, not an organisation or a system Instead of letting the Department of Health reinforce its notion of

itself as the headquarters of the NHS, the healthcare industry should

be creating the structures to cooperate on devising and delivering

the programmes it believes it requires, not passively accepting what

is offered up by ‘the centre’. At the moment the Department of

Health pretends to ‘stand for’ the industry when in fact it ‘stands

for’ Whitehall.

Developing real power of the payors At the moment whilst enquiries may be made into the performance

of a commissioner, neither the Department of Health nor the SHAs

have created a risk-based national system of regulation for commis-

sioning to match the regulatory framework within which

Foundation Trusts operate. This is long overdue. Not only would it

drive forward the development of commissioning, but it would

begin the process of culture change that is so essential for the future

of healthcare in England.

Commissioning needs to develop into the local driving force of

service improvement, challenging providers to be more efficient

and effective and to meet the needs of patients in the most clinically-

Execu*ve Summary | 9


and cost-effective way. Commissioners need to develop different

ways of assessing the real needs of the populations they serve, and

effective methods to ensure that real needs are met and demand is

properly managed. Above all, commissioners need to embrace the

concept of being the patients’ friend.

ConclusionThe policy framework is right, as is the service architecture.

Resourcing is historically high (although the next few years will be

difficult). But still the old culture of centralised control remains the

dominant force and with it comes the politicisation of decisions

and the undermining of the autonomy that is essential for change

and innovation.



1. Introduction: why do thepublic want Ministers to thinkthey have to run the NHS?

Politicians as managers Both authors have spent much of the last six years building up the

Foundation Trust sector in the NHS and in different ways trying to

persuade the Government to implement with some enthusiasm

three aspects of its health reform agenda – tariff, competition policy

and devolution. In many ways much of this period has been spent

in the detail of helping Foundation Trusts become and remain

much more independent. But one of the puzzles of this work is

often how hard it is to convince people who have spent their lives

working in the NHS that this independence is a good idea. All the

analogies of pushing water uphill are really explanations of what it

feels like to take on – on a day to day basis – a strong culture. And

that has been the experience of the Foundation Trust movement

within the NHS.

What the NHS developed over the last 60 years has been a

culture of dependence. Its culture (the way in which we do things

round here) is one where people’s eyes and attention are instinc-

tively drawn upwards to the Department of Health and on top of

that to the Secretary of State.

If we are to develop a new culture of independence, we will need

to understand why the old one has such power.

A key feature of public services in the UK is the role played by

national politicians and through politicians the role played by the

State. We have a long tradition where Ministers decide not just the


overall architecture of the service and the resources to be allocated

to it and perhaps the performance standards to be met, but also, in

many cases, matters which are essentially operational and relatively

detailed. It is easy to claim that they do this because they personally

can’t resist the urge to meddle, but they also do this because the

public demand that they are accountable for the day to day activity

of the service. The public want to ‘write to their MP’ and will do so

in the expectation that their MP can get the Secretary of State to do

something about the dirty toilet in their hospital. So, in assessing

how the efficiency and effectiveness of public services might be

improved one has to start by asking the question: What is the correct role

of politicians in designing and operating a healthcare system that meets the three

requirements above?

In the reformed healthcare system in England Ministers have a

variety of ways in which they can decide or influence how health-

care services are designed and delivered.

Ministers:

1. decide on the total level of public expenditure to be spent on

healthcare and how this should be allocated;

2. decide the price to be paid for specific treatments under the

system of Payment by Results (PbR);

3. decide what treatments are outside the NHS, through their poli-

cies and their decisions on recommendations from The National

Institute for Health and Clinical Excellence (NICE);

4. decide the terms of the contracts under which commissioners

purchase care from providers (including the private sector);

5. decide pay levels and terms and conditions for all the staff

employed by NHS organisations;

6. decide the shape of the secondary care sector through their

decisions on major capital investments, their approval or rejec-

tion of controversial proposals to close services or buildings,



their approval or rejection of proposed mergers of non-founda-

tion trusts etc.;

7. decide on the outcomes of all of the reconfigurations of hospi-

tal services if they are referred to them by local politicians;

8. specify the quality standards to be enforced by the Care Quality

Commission (CQC);

9. influence the organisation, quality and delivery of primary care

services through their negotiation of the national contract with GPs.

...and much more.

Why?Many of these activities are not inherently political. Indeed many

are essentially technical, requiring skills and experience possessed

by few politicians, whose criteria for taking decisions is not tech-

nical but political and therefore partisan. Ministers are therefore

inappropriately drawn into activities that concern the detail of

managing a health service. They and the public draw them into the

inevitable detail of this or that service and, when the NHS absorbs

one-fifth of all public expenditure, collectively employs 1.3 million

staff and has dealings with all of us at some time in our lives, this

is not only inappropriate but simply not possible.

This looks to be common sense which intellectually almost every

Secretary of State for the last 30 years would agree with. Yet

inevitably, when they gain the position, Secretaries of State some-

times within days get drawn into this level of managerial detail.

Before we deal with any analysis of structure we need to answer the

cultural question: Why do politicians think that they are best placed to lead

and manage such a complex healthcare system?

The answers to that question lie in the history of the creation of

the NHS, and the culture that has developed in the Department of

Health as the relationship between the public as voters, politicians

and the NHS has evolved over the last 60 years.

Introduc*on: why do the public want Ministers to think they have to run the NHS? | 13


The development of the NHSWhat we refer to today as the NHS is actually two distinct, but

closely intertwined systems both created simultaneously in 1948.

In order to secure the ability to give the public healthcare free at

the point of delivery the Atlee government essentially nationalised

all the different hospital systems that had developed piecemeal.

Some were private companies, some were charities or local author-

ity services that had their origins in Victorian or earlier

benefactions, and some were major teaching and research hospitals.

Most were funded by a combination of charges for services and the

income from benefactions and charitable foundations. Their build-

ings and staff and equipment (but not their endowments) became

the property or the employees of the State.

It is impossible to overestimate the impact

of this on the NHS over the last 60 years. This

was the model that the Atlee Government

were implementing for most of their major

interventions. The ownership of the coal

industry and the railways were taken over by

the State. As with the nation’s hospitals this

policy was not simply an ideological one

supported by an electorate that wanted to

support a new ideology. All of these indus-

tries and services had been effectively

nationalised during the Second World War.

During the war the Government not only ran large parts of

industry but it also had the power to direct staff to go and work in

certain industries and, through the rationing of food, had taken the

market place out of that most necessary of services. Whilst there

were a lot of grumbles about how the State had done this, for the

majority of the population the experience of World War II was one

where the creation and distribution of these services was an

improvement on the pre-war period. This was why nationalisation


““The essential point was thatthe NHS was establishedeffectively as a mutualinsurance system, and remainsso today. Everyone contributedand everyone would benefit,but the benefit and the timingof receiving it was not directlydetermined by the level andtiming of contributions””


was such a straightforward intervention. And why the nation’s

hospitals being taken into ownership by the Secretary of State

seemed a simple way of creating a new National Health System.

GPs, of course, remained self-employed operating under contract

to the NHS, with access to the new NHS pension fund but retain-

ing ownership of their practice premises. This was not in the

original plan for the NHS but was the result of a compromise

between the Government and the doctors which saw the 90% who

voted against joining the NHS in February 1948 join enthusiasti-

cally within six months. This was an expensive compromise that has

had repercussions throughout the history of the NHS and up to the

present day.

At the same time as the NHS was launched in July 1948, the

Atlee government also instituted the social security system funded

by the new National Insurance Fund, based on the recommenda-

tions of Sir William Beveridge. This fund was created by the

introduction of a new tax, separate from income tax, and calculated

on a different basis. It was intended to provide the finance needed

to fund the new, universal State old age pension and family

allowances. In the mind of the general public the National

Insurance Fund was also expected to meet the costs of providing

free healthcare for all, although in practice the majority of the

public funding of the NHS has come out of general taxation.

For both social security and the NHS those who had an income

were obliged to contribute, either through their contributions to

the National Insurance Fund or through income and other taxes.

Those who didn’t have an income had contributions to the National

Insurance Fund credited through a variety of special arrangements,

and had their healthcare costs met by the State.

The essential point was that the NHS was established effectively

as a mutual insurance system, and remains so today. Everyone

contributed and everyone would benefit, but the benefit and the

timing of receiving it was not directly determined by the level and



timing of contributions. And at no point in his report did Beveridge

suggest that ownership by the State of the assets of the NHS was

necessary or even desirable. It was a matter on which he was

completely silent in his report.

This mutual insurance system is what truly constitutes the NHS.

It is the insurance system that enables care to be free at the point of

delivery for everyone. It is this principle in practice that the public

support and indeed love. The idea that we all pay for ourselves and

for each other in a large risk pool is a concrete part of the way in

which the public think and feel about the NHS. This is not an

abstract political relationship but is an actual experience of paying

taxes and receiving benefit.

Politicians, senior civil servants and NHS managers often disparage

this analysis as reducing the NHS to “merely a funding system”. This

is completely to misunderstand or misrepresent the nature of an insur-

ance system and the power it can exercise. Operated properly this

mutual insurance system – the NHS – could drive improvement in the

design of services, in the quality and safety of care, in the physical envi-

ronment, in the training and quality of staff, in productivity… indeed,

in pretty much every aspect of the healthcare service, publicly and

privately-owned. But in practice this part of the system – mutual

purchase of health care – is neglected and often despised.

This mutual insurance system – the NHS – is the commissioner

or payor. And, until recently it has been left ignored on the side-

lines. Why?

The answer is that at the creation of the NHS – and ever since –

the public didn’t, and doesn’t, see the new insurance company. As

outlined above the ideology of the payment system – we all pay for

ourselves and each other – is very strong, but how that has been

turned into the practice of buying my hip replacement or my drugs

is obscure. In contrast what the public saw, and therefore what they

very quickly regarded as ‘the NHS’, was doctors, nurses, buildings,

equipment and institutions.



The importance of mutual insurance as the fundamental compo-

nent of the healthcare system was completely lost on the public and

they have been offered no part in this throughout the history of the

NHS. They weren’t given the set of accountability relationships that

would build the link between paying their taxes and their national

insurance stamp (as it then was) and the availability of free health-

care, because to get free healthcare they didn’t have to demonstrate

a record of national insurance contributions or even membership of

the National Insurance Fund. They simply went to the hospital or

clinic or GP’s surgery and got whatever treatment they appeared to

need.

The national insurance stamp and having a complete and prop-

erly recorded history of national insurance contributions was

important to the public, but only because this was the only way to

get a full – or, in some cases, any – old age pension. There was a

direct link and it was clear and constant in the minds of the public.

In contrast the public didn’t link their national insurance contri-

butions record to getting access to free healthcare. It was now free.

This means that in practical terms there was no experience of cost

to them. Only in an abstract way was it their money. (This is why if

the public is asked “Should there be more money spent on the

NHS?” the answer is always “Yes”, even after record increases.) The

money comes from somewhere else so, of course I want more.

So, the users of the healthcare system and the wider public –

who were also the funders of the system – had no stake in improv-

ing efficiency and productivity or reducing the costs of care,

because they saw no relationship between the taxes they paid and

the cost or volume of care they received. Receiving healthcare free

at the point of need became an entitlement. You did not receive free

healthcare because you had been paying for it. You received it

because it was a part of being British.

Within this context any attempt to close local services to concen-

trate clinical expertise and to reduce costs were regarded by the



public as attempts to reduce the scale and scope of the NHS and were

generally fiercely resisted. And as new treatments became available the

assumption was that they would be ‘on the NHS’ in other words

available free to all. Even as the NHS came into being the stresses and

political pressures this attitude would cause were very apparent. The

Atlee government was divided over prescription charges and charges

for some dental and ophthalmic services. Bitter political battles over

the scale and scope of charging, or indeed its very existence as an

integral part of the funding and rationing mechanisms of the NHS,

were a regular feature of the Labour governments of the 1960s and

1970s. And in the minds of many of the public, the attitude to charg-

ing for elements of healthcare came to be a key issue that defined the

difference between the Labour and Conservative parties.

The public and political perception of the NHS as being the

hospitals, clinics, GPs’ surgeries and the staff who worked in them

had much wider ramifications. In 1948 the State took these institu-

tions into its own ownership, not simply in an ideological sense but

concretely. And since they were owned by the State there had to be

some accountability for that public money and publicly owned

organisation. If the public in some sense ‘owned’ these facilities,

someone had to exercise the ownership function for the public and,

given the accountability through the electorate, then Ministers must

surely ‘manage’ them on behalf of the public and could be called to

account for their stewardship. In that sense the Secretary of State for

Health not only took the nations hospitals into ‘public’ ownership,

but into ‘personal’ ownership.

Out of this reality of ownership and accountability grew the

perception that:

� Ministers run the NHS... they decide how it should be organ-

ised, where funding should go and how it should be spent,

where facilities should be located and what care they should

and should not deliver… and a hundred other things;



� Parliament should call Ministers to account for their manage-

ment of the NHS… Ministers should answer questions and be

grilled by Select Committees, the details of the organisation and

delivery of healthcare services should be subject to debate and

challenge in the Houses of Parliament, much of the framework

within which the NHS operates should be set out in law and

MPs should individually represent their constituents’ particular

concerns about the NHS to the Minister who will be held to

account for this detail;

� ‘Clinical freedom’ exists and should be preserved and extended.

In other words clinicians – actually, doctors – can do as they

please and are not subject to challenge by the Secretary of State,

his officials or anyone else on grounds of cost or quality or

appropriateness.

These three perceptions – all of them have sprung from the way in

which the NHS was set up and yet all of them are highly question-

able – have shaped 60 years of the NHS, and seldom for the better.



2. The NHS as a corporate entity

Of course given the million people who interact with the NHS

every 36 hours it is just not possible for Ministers to carry out all

this activity. Ministers themselves do very little of what is required

of them by legislation or attributed to them by the public and the

media. Mostly, their government departments – the Civil Service –

formulate the decisions for Ministerial approval, and often take and

implement the decisions with little or no involvement of Ministers

or Parliament. This is not to say that this is inappropriate given the

scale of the enterprise – how could it possibly be otherwise?

But to understand how the NHS has developed, we have to give

some thought to how the Civil Service thinks and behaves as it tries

to manage the NHS. It carries out this task on behalf of successive

governments with very different political philosophies about the

role of the State, the management of the economy and what might

be the legitimate expectation of the citizen, the taxpayer and the

current user of the healthcare system. We also need to remind

ourselves of the context in which the NHS has developed –the

economic and political context, and the development of healthcare

technology - and of the attitude of the public to the NHS.

Since the end of the Second World War the UK has had to rebuild

its economy after the immense financial burdens created by fight-

ing prolonged and expensive wars in Europe and in the Far East.

Along the way the country has experienced periods of high infla-

tion, which successive governments have tackled through tight

controls on public expenditure and borrowing, on the levels of pay

settlements throughout the economy and on the growth of the

money supply. In parallel the UK has moved from a nation defer-

ential to authority and grateful for whatever level of public services


governments made available, to a nation with a strong consumer

attitude and high expectations, determined to have their rights

respected and their needs and wants met. Whilst this is a gross

simplification of the economic and social history of the post-War

period and omits many key changes, it does recognise the consid-

erable impact that the twin themes of the impact of economic crises

on public expenditure and the rise in public expectations have

together had. These are the key developments that have shaped the

evolution and management of the NHS.

For much of the period up to the early 1990s the Civil Service

was grappling with how to control public expenditure and infla-

tion, while simultaneously responding positively to public

expectations of more and better public services, especially health-

care. The NHS was a particular headache. When the NHS was

created the assumption was that, as the population had easier access

to healthcare, their health would progressively improve and there-

fore demand for healthcare would decline. We now know that this

was flawed logic.

What Beveridge and Bevan and the creators of the NHS could not

have foreseen was the growth in medical technology and its impact

on demand for healthcare services and therefore on the cost to

public expenditure of providing an apparently free service. The

main drivers have been:

� The development of diagnostic technology from simple X-ray

machines to the MRI scanners and other technologies of today

has enabled much earlier and more extensive diagnosis, and

therefore treatment, of conditions that were previously never

diagnosed or identified only well after effective treatment was

realistically possible;

� The development of anaesthetic drugs and techniques has

enabled more extensive and complex surgery to be performed

on a wider range of patients than ever before. Elderly patients

The NHS as a corporate en*ty | 21


can now be operated on and recover fully from major surgery,

when twenty or thirty years ago they would have been kept as

comfortable as possible as they died;

� The development of immuno-suppressive drugs and surgical

techniques has enabled a large and growing range of transplant

operations to be offered as routine treatments to a wide range

of patients;

� The improvement of prostheses has made joint replacements a

treatment of choice for those with arthritic conditions, and the

subsequent replacement of the prostheses when it begins to

wear out has created new and growing areas of need or

demand;

� The fact that all of these and rising standards of living have

increased life expectancy so that nearly everybody now will

spend the last 20 years of their life with one, two or three long

term conditions that need some form of regular medical inter-

vention.

The list is long and growing. Care has progressed from palliative

(relief of pain & symptoms) to curative and is now increasingly

about improving personal performance and quality of life rather

than curing life-threatening conditions.

These developments presented successive generations of politi-

cians and civil servants with acute policy and managerial dilemmas.

But the NHS was comprehensive and free. Rationing or extensive

charging was politically unthinkable. And clinical freedom meant

that decisions on what treatments to make available and to which

category of patient were taken by the clinicians themselves, and

their judgements were generally based on the benefits to the indi-

vidual patient with no thought for the wider consequences for the

NHS or indeed for the Country.

Taken together these forces generated the potential for uncon-

strained growth in demand and cost. Yet this was taking place in a



system where resource could only be generated by increases in

taxation, at times when the imperative was to control and then

reduce public expenditure and inflation across the economy. In the

absence of mechanisms to control demand and cost, and to manage

clinical and public expectations and with politicians seeking (and

then offering) reassurance that the NHS was indeed “the best

healthcare system in the world”, the

Department of Health adopted the only strat-

egy it could think of – tight central control

over the operation of the healthcare system

and subterfuge to persuade politicians and

the public that the service was good and

improving. This tight central control was the

only way in which the Civil Service could

think of to control public expenditure. In fact it was the form of

public expenditure control that had always been typical of the

Treasury. They felt that they had to have sight of every pound that

left the Treasury and was spent by public organisations and, having

sight of that pound, they could at any stage withdraw that expendi-

ture. Public expenditure control was based upon being able to

intervene all the way down the service and – the theory went – you

could only intervene if you had the control to do just that.

It is probably not correct to describe the Department’s approach

as a ‘strategy’ – thought through, objective, optimised against

defined criteria and persisting over many years and successive

governments. Rather the Department’s approach was the accumula-

tion of many individual decisions designed to manage short-term

pressures for more or better services. What seems irrefutable is that

the Department of Health’s main purpose came to be to avoid a

general recognition emerging of the gap between what the Country

appeared to want from the NHS and what the Country could afford

at different times, so that the consequences of this gap did not

become politically unmanageable for the government of the day.


““Care has progressed frompalliative to curative and is nowincreasingly about improvingpersonal performance andquality of life rather than curinglife-threatening conditions””


This in turn generated a culture in the Department that was simul-

taneously tightly centralist and controlling, and deliberately

opaque.

The highly centralised bureaucracy and tightly planned system

that was progressively created to ‘run’ the NHS from Whitehall was

founded on a number of assumptions:

� Capacity – beds, buildings, staff and equipment – could be

planned precisely, and by this means supply and demand could

be brought into equilibrium and kept there;

� Competition was wasteful. It required some spare capacity to

enable competitive forces to drive change. The spare capacity

represented poor value for money, because it was not strictly

required in a world where supply and demand could be

brought into balance;

� The profits made by the private sector were money the taxpayer

need not have spent because they didn’t buy anything for the

taxpayer. Profits were, therefore, poor value for money. The aim

should be a minimum cost system, which could best be

achieved by a system that did not require profits or dividends to

be paid to shareholders – a State-owned system. It was in the

interests of the taxpayer to cut the private sector out of the NHS;

� The public could not make choices in such a technically-

complex system as healthcare. The doctor (sometimes nurse)

knew best what care to offer. The views of patients were irrele-

vant. Whitehall knew best where services should be located,

how buildings should be designed and equipped and staffed,

and how services should be organised. Patients’ preferences

were irrelevant. The taxpayers could not be expected to fund

‘frills’ such as attractive and comfortable surroundings,

customised services and care etc. Within this particular view of

value it was required that the service be basic and utilitarian

because best value was synonymous with minimum cost;



� Best value for money could be most sensibly defined centrally.

Outside of the clinical sphere, Whitehall could and should spec-

ify the design of buildings, the pay and conditions of staff, how

services should be designed, which buildings should close and

which should remain open... and a host of other, essentially

operational matters. Intrinsically these were decisions that

generally could and should be taken locally, but allowing this

risked local managers acceding to pressures from the public or

clinicians for more services or higher standards, which would

expose the inherent strains in the system between improving

quality and constraining cost.

The approach had several unforeseen but important consequences.

First, since the Department of Health was a Department of State

with a politician accountable to Parliament for its activities, what

the Department did was essentially political. This meant that the

public and the healthcare professions and backbench MPs came –

rightly – to believe that all important decisions about the NHS were

essentially political rather than managerial decisions. The way to get

what you wanted from the NHS was to lobby the Minister and

create political pressure on the government through debates in

Parliament, have petitions presented to No10 with as much public-

ity as possible, organise marches with the public and nurses in

uniform, and as much negative press coverage as it took to get the

Minister to cave in… which they did with depressing regularity,

irrespective of their political colour.

This attitude, and the results it generated, encouraged those in

the NHS not to be managed by it but to use the politics of lobby-

ing to try and influence their management. In turn, this placed the

senior management of the NHS in a very difficult position; they are

meant to ‘control’ the NHS, but the fact that they are within a

democratic political system means that NHS employees can and do

appeal to the public for support against that management.



Second, administrators and subsequently managers (who were

late to emerge in the NHS) learned that their over-riding objective

was to keep the political noise down. Challenging orthodoxy to

improve the effectiveness and reduce the cost of services, tackling

poor clinical performance, promoting innovation in the design and

delivery of services and in the utilisation of labour and assets…

these were fine so long as they did not lead to political controversy

and embarrassment for the Minister or the Government.

Pictures in the media of the Queen or the Minister cutting the

tape to open a new building or gazing in wonder at some puzzling

new machine or greeting happy smiling patients sitting up in well-

made beds with Matron hovering in the background… these were

smiled upon. If there was public disagreement from staff or the

public were in the press trying to stop change, the manager was

seen to have failed. This created in managers a culture of what

counts as success being a lack of confrontation and stopping any

changes that might lead to confrontation. Successful managers

made sure that nothing got in the papers, even if this was at the cost

of very little challenge and change.

Third, this combination of weak management and political pres-

sure being the easiest way to secure a desired outcome gave the

clinicians no encouragement to take any responsibility for manag-

ing the services they delivered. Clinicians professed loyalty to their

individual patients or to the requirements of their professional

bodies. They would do what they felt they had to do to secure the

resources they required to treat their patients, even if this meant

criticising publicly and lobbying against the managers of the insti-

tutions in which they worked and the organisation that paid their

salaries. There was no appetite or incentive to take on a leadership

role, and very few routes by which this could be accomplished.

As a consequence, it wasn’t clear, beyond a simple desire for

everything, what the public was entitled to expect from the NHS in

return for its taxes, and there was no desire or incentive to make it



clear. Accountability within the NHS was diffuse and financial pres-

sures were managed through using long waiting times to manage

demand. For the most part, poor clinical or managerial performance

often went unchallenged. Clinical and managerial decisions were

often based on pressure rather than objective criteria and good infor-

mation, and the outcome was often the lowest common

denominator dressed up as a clinical/managerial/political consensus.



3. Challenging and changingNHS corporate

Twenty years of reformThe successive Conservative administrations of the 1980s and

1990s embarked on major reforms of the organisation, manage-

ment and funding of the public sector. In the public trading sector,

industries were privatised. In the public services reliance was placed

on a combination (which evolved over time) of more professional

management, better identification and control of costs, tighter cash

budgets and independent scrutiny (the National Audit Office, the

Audit Commission). In time a degree of user choice would creep

in, especially in education.

The reform agenda was perhaps weakest in the health sector. In

the face of incredulity from the Department of Health that any form

of market-like reforms might be contemplated and conscious that

the public had a strong attachment to free, apparently un-rationed,

healthcare and strong suspicions that the Conservatives could not

be trusted to maintain this status quo, Mrs. Thatcher lost her nerve.

The internal market was created but with none of the characteris-

tics of anything approaching a market. So-called self-governing NHS

Trusts were created, but these organisations had little or no real auton-

omy. NHS Trusts had their budgets set and board members appointed

centrally, and capital expenditure was allocated centrally. The buildings,

as had been the case since 1948, were owned by the Secretary of State,

who claimed the proceeds of the sales of any surplus land or buildings.

With no tariff there was no price for services and therefore no

incentives to do more work, since you were paid irrespective of

output, or to reduce costs or improve productivity. Patients had no


real choice of GP or hospital, and therefore service providers had no

incentives to improve service quality or patient experience (then an

unrecognised concept) and purchasers had no levers to drive

change or improvement. NHS contracts defined services but they

were not legally binding and in practice were often little more than

lists of services to be delivered.

The Department’s culture of a centrally planned and tightly

controlled publicly-owned service had triumphed over Mrs.

Thatcher’s strategy which was transforming the cost and perform-

ance of huge parts of the wider economy – telecommunications,

energy utilities, even parts of the Civil Service. And unlike in these

industries, where existing and new managers and investors had

seized the opportunities offered to them, in the NHS many

managers and clinicians united in their opposition and refusal even

to contemplate change.

Culture ate strategy for breakfast.

Under John Major, public services were expected to be more

consumer-focussed. The Citizens’ Charter rewarded local attempts

to define and meet the expectations of service users. But in health

it was little more than window dressing. After a decade the health

reform agenda quietly petered out.

Things can only get betterWe are now well into the second major attempt to reform the NHS,

launched by Tony Blair (but only in his second term as Prime

Minister) and carried forward, hesitantly, by Gordon Brown. Two

Prime Ministers, five Secretaries of State for Health and seven years

of relative stability in the policy framework coupled with the largest

ever injection of cash into the healthcare system… has the culture

been overturned and strategy triumphed? Or is the culture simply

catching its breath before it consumes another hearty breakfast of

toasted strategy?

Challenging and changing NHS corporate | 29


After a wasted first term Tony Blair eventually got a lot right. The

Government asked the people who used different healthcare serv-

ices what they really wanted. Not surprisingly two major elements

of the answer were shorter waiting times and being treated as

human beings with feelings and points of view, and not simply

cases who received passively whatever treatment was offered them.

Blair’s Government also accepted the public’s desire to see signifi-

cant investment in the healthcare system, but recognised that this

had to be deployed as a lever to secure significant and lasting

improvements in labour productivity and, ideally, to create pres-

sures and incentives for productivity and efficiency to improve year

on year.

The solution adopted was to start where Thatcher left off, but this

time to apply the levers of change with some power:

� The internal market was created under the guise of commis-

sioning and provision;

� A national tariff was introduced to set a defined, non-negotiable

price for a wide range of secondary and tertiary treatments;

� Patients were given the right to choose – progressively widened

to an unconstrained right to choose any hospital or provider for

their treatment;

� With money following the patient and the tariff now defining

the price of treatment, hospitals had real financial incentives to

attract patients and cut costs;

� Competition not collusion was the ethos, with a deliberate

programme of encouragements to the private sector to enter the

market and create the competitive pressures the system had so

far lacked;

� Commissioners were encouraged not to assume that their tradi-

tional provider was necessarily the best but to seek bids for

services from any willing provider who could meet the NHS’s

standards (which were not yet well-defined) at the tariff price;



With the price fixed, competition was on quality of service –

better, safer treatment delivered in ways that best met the pref-

erences of the service user;

� And, through the creation of Foundation Trusts Ministers took

the first tentative steps to get out of central, operational control.

Challenging and changing NHS corporate | 31


4. Foundation Trusts – thebeginning of the end of the NHSas corporate?

The creation of Foundation Trusts was one of the most bitterly

contested reforms introduced by Tony Blair. The legislation was finally

passed in 2003. As Antony Seldon records: “Nine separate rebellions

occurred during the six month passage of the Health Bill threatening

its survival all the way through to the final vote. In total 87 Labour

MPs voted against it at various points. At 5 pm on 19 November 2003

the Commons finally agreed with a majority of just seventeen.”1

Now, six years on and with Foundation Trusts the majority of

hospitals and widely regarded as one of the real successes so far of

the whole reform programme, it’s hard to credit some of the criti-

cisms and concerns voiced during the Parliamentary debates. Claire

Short argued that “giving them [Foundation Trusts] greater author-

ity and more privileges will lead to growing inequality”. Other MPs

expressed concerns that the ability of Foundation Trusts to “poach

staff” would “increase health inequalities”. For Frank Dobson, the

creation of Foundation Trusts would be “damaging and divisive”. In

2003 during the passage of the legislation the idea that Ministers

would completely relinquish any control or influence over the

operation of a hospital ‘owned’ by the NHS was an almost unthink-

able challenge to the concept of the NHS as an integrated healthcare

corporate and to the culture of centralised control and subordinate

management that this had bred.

In many people’s minds the link between the Secretary of State

actually owning the hospital and the principles of the NHS seemed

1 “Blair Unbound” Antony Sel-

don, Simon and Schuster

1007 (Page 246)


one and the same thing. These people felt that, if you separated the

ownership of the hospital from the elected politician, the NHS

could no longer really be a publicly paid for health service. There is

of course no straightforward logic in this position, but it did have

nearly 60 years of experience behind it.

Yet, Foundation Trusts were an inevitable consequence of the

reform agenda. Without them reform would have been short-lived.

As Alan Milburn discovered it was one thing to make promises to

the public in the form of defined maximum waiting times, but

quite another to get these delivered. The formidable Ministerial

pressure that he could exert could ‘persuade’ the most recalcitrant

hospital chief executives to improve their organisation’s perform-

ance. But, without real incentives, effective accountability and

serious consequences for failure, the integrated, corporate system

was incapable of delivering the Government’s promises of shorter

waiting times, and there were simply not enough hours in the day

and not enough telephones in the country for the Secretary of State

personally to intervene in every case when a target was not being

met.

So the powerful challenge of requiring the system to meet mini-

mum waiting times meant that the Government was forced to look

at incentives that would drive more activity within the system. And,

if the leadership of organisations were to be incentivised to do

more work, then the organisation needed some freedom to be able

to both maximise that activity and secure the incentives that had

encouraged them to do that extra work.

Moreover, the more the public was encouraged to regard the

Secretary of State as, in effect, chief executive of the hospital system,

the more likely it was that he – and therefore the Government –

would be blamed for every failure – real or perceived – by a

demanding public, whose attitudes to public services were increas-

ingly consumerist (following the encouragement of the Thatcher,

Major and Blair Governments).

Founda*on Trusts – the beginning of the end of the NHS as corporate? | 33


The Secretary of State could not win. The doctors and nurses

got the credit when services were perceived to be good (even if,

in reality, they were mediocre). He got blamed for the slightest

failure, even when in reality it was often incompetent or unwill-

ing managers who were at fault. There must have been many

times when he felt he was the only person with any public

accountability in the whole NHS. And in fact in many people’s

eyes he was.

What Alan Milburn came to realise, implicitly, was that the

right policy framework was not enough. The culture of centralised

control to deliver what Ministers wanted had to be altered perma-

nently to make the patient and the service user much more the

focus of service planning and delivery, and they had to have the

ability to influence the service managers and clinicians.

So, it should be no surprise that the statutory and operational

framework for Foundation Trusts involved incentives, sanctions and

local public accountability.

The key features of the Foundation Trusts and the regime within

which they operate are:

The Foundation Trust

1. is run by its board of directors (‘the board’). The board is

accountable under statute to Parliament (via its chief execu-

tive as accounting officer), to its regulator and to its

governors;


Type of NHS Healthcare Trust

Acute Hospital Trusts 168

of which Foundation Trusts 88

Mental Health Trusts 58

of which Foundation Trusts 38


2. earns income from legally-binding contracts with its commis-

sioners (mainly Primary Care Trusts). If it can deliver services

more cheaply than the tariff, it can make and retain surpluses to

invest in developing its services;

3. can borrow commercially, retain the proceeds from the sale of

assets and can fail financially;

4. has a membership recruited from its patients and staff and from

the public it serves. The members elect a board of governors and

in addition governors are nominated by key stakeholders.

The governors’ main duties are

1. to appoint the chair and non-executive members of the board

and determine their terms of service;

2. to appoint the auditors and receive their report;

3. to call the board to account.

The Secretary of State has no power of direction over Foundation

Trust. His influence comes via the commissioners – the Primary

Care Trusts – with whom the Foundation Trust negotiates contracts

for the provision of services. Oversight and scrutiny of the

Foundation Trusts is performed by Monitor:

The Independent Regulator of NHS Foundation Trusts (“Monitor”)

1. assesses applicants to be Foundation Trusts according to criteria

it determines;

2. specifies the terms of the Foundation Trust’s Authorisation;

3. intervenes, if a Foundation Trust should significantly breach the

terms of its Authorisation. To secure renewed compliance with

the Authorisation, Monitor can replace any or all the members

of the board or the governors, require the appointment of

advisers, instruct the Foundation Trust to do, or not to do spec-

ified things (which covers all aspects of its operations, clinical

and non-clinical).



4. Controls borrowing by each Foundation Trust and the income

each can earn from private patients;

5. Defines the reporting requirements and the audit code for

Foundation Trusts;

6. Publishes a wide variety of financial and performance information;

7. Approves a merger with another Foundation Trust or a major

acquisition.

This system contains the balance of incentives, sanctions and

accountability that Ministers rightly judged necessary to give confi-

dence that Foundation Trusts would meet the needs of patients,

improve quality and efficiency, respond to their commissioners, be

called to account locally and not take risks

they could not manage.

The tariff and patient choice, coupled

with the ability to make surpluses and retain

them, give Foundation Trusts powerful

incentives to secure and retain contracts from

commissioners, pursue opportunities to

increase market share profitably, improve

productivity and efficiency and deliver services in ways that reflect

the preferences of those who use them and those who refer

patients.

Monitor’s high standards for authorisation and robust assess-

ment process generally ensure that Foundation Trusts start with

strong boards and good governance, that their business plans are

initially robust and that the organisation has the capacity and

capability to meet its various obligations. The compliance regime

has demonstrated that Monitor can identify risks to financial

viability or service delivery and is increasingly confident in its

ability to forecast likely future serious risks of failure in time for

them to be dealt with. Monitor’s considerable powers of inter-

vention, and its proven ability to use them effectively, generally


““There is still a tendency forboards to treat governors asambassadors for their hospitalrather than recognising thegovernors’ legitimate right tocall boards to account””


ensure Foundation Trusts adhere to the terms of their

Authorisation.

Foundation Trusts were designed to be more responsive to the

needs and wishes of their local communities. Anyone who lives in

the area, works for a Foundation Trust, or has been a patient or serv-

ice user there, can become a member of the trust. By the end of

2009 there were roughly 1.5 million members. These members

elect the board of governors of which at the end of 2009 there were

400 governors of the 126 boards. Foundation status is granted to

high performing trusts after successfully completing an application

process administered by Monitor. Foundation Trusts are different

from NHS Trusts because:

� they are not directed by Government so have greater freedom to

decide their own strategy and the way services are run;

� they can retain their financial surpluses and borrow to invest in

new and improved services for patients and service users; and

� they are accountable to their local communities through their

members and governors, their commissioners through

contracts, Parliament and to Monitor as their regulator.

Local public accountability is perhaps the area where the system is

taking longest to develop. There is no shortage of interest. All

boards of governors had exercised their statutory functions to

different degrees – appointing or re-appointing chairs and

members of boards of directors, receiving audit reports, comment-

ing on the annual plans of their Foundation Trust. But there is still

a tendency for boards to treat governors as ambassadors for their

hospital rather than recognising the governors’ legitimate right to

call boards to account. And governors are too often willing to be

ambassadors.



5. Does the system work?

Up to a point it does.

Evidence about service quality and the clinical performance of

public-sector healthcare bodies is currently very patchy. However,

it is all that is available. For Foundation Trusts it offers a generally

positive picture, both about the performance of individual institu-

tions and about the effectiveness of independent regulation.

Successive annual health checks published by the Healthcare

Commission and its successor the Care Quality Commission (CQC)

have shown Foundation Trusts to be consistently the best perform-

ers. The Royal Marsden Hospital, for example, has been rated

sive annual health checks. In the most recent annual health check

for 2008-09 (published by the CQC in the autumn of 2009) there

were 38 trusts that were rated Excellent for use of resources and

Excellent for quality of service and 36 of those were Foundation

Trusts.

In part this reflects an improvement in the calibre of the boards,

and specifically the non-executive directors. The removal of the

Secretary of State’s power of direction, which means the board of a

Foundation Trust is truly in charge, appears to have made member-

ship of a board much more attractive to a wide range of people with

experience of running large and complex organisations, and with the

skills to set strategy, monitor performance and call management to

account effectively. It may also reflect the impact of the tariff and

patient choice. Boards populated by people who have run businesses

whose success depends on satisfied service users, and clinicians

who want to be able to secure investment in service improvement,

appear to be responding to the incentives and pressures created by


Excellent for both its quality and its use of resources in four succes-

giving patients freedom to choose, allowing money to follow the

patients and enabling hospitals to benefit from improved effi-

ciency by generating and retaining surpluses for future

investment.

However, it would be hard to demonstrate convincingly that

there are truly world-class hospitals in England. In contrast, most

people would agree that there are several world-class English or UK

universities in any list of what are regarded generally as the world’s

best. In part this difference reflects the very poor data available to

assess the true quality of hospitals as measured by the safety and

effectiveness of their clinical services and their responsiveness to

patients. This is changing, but very slowly. There are better meas-

ures for universities, and these have become more important as the

UK’s higher education system has had to market itself across the

world and as individual institutions have had to compete in the

global and domestic markets to attract students. That said, the fact

that universities clearly are in charge of themselves and each insti-

tution has a different relationship between itself and government is

important.

Foundation Trusts have many features in common with universi-

ties. Although constitutionally the two types of institution are

statutorily protected from direct Ministerial involvement in their

management or operations, in practice the involvement with

Foundation Trusts remains much closer. It isn’t obvious from the

relative performance of the two sectors that this brings benefits in

the quality of services delivered.

There have of course been some under-performing Foundation

Trusts, in relation to both finance and clinical or service quality. This

is regrettable, but is probably inevitable. The fact that failures occur

does not of itself demonstrate that the policy is a failure. Far from

it. Contract monitoring and performance reviews by commission-

ers, independent regulation by Monitor and the publication of data

on service quality by the Healthcare Commission and now CQC

Does the system work? | 39


means that problems are openly acknowledged, however politically

embarrassing they might be, and have to be tackled speedily and

effectively.

This system puts great pressure on boards to recognise their

organisation’s problems, to devise effective plans to remedy them

and to show that these plans have had the desired impact. Boards

that can’t or won’t solve their problems can and are replaced by

Monitor using its statutory powers of intervention. The fact that

Monitor has used its powers on a small number of occasions, either

because its own data has identified serious under-performance or

because of the concerns of a Foundation Trust’s commissioner,

means that Foundation Trusts take seriously and respond to

Monitor’s concerns about performance or governance.

The days are not yet over when hospitals would use political

pressure to transfer their problems elsewhere or have inefficiency

unnecessarily subsidised, and when under-performance was

hidden from public view and dealt with quietly (if at all) to

minimise political embarrassment, but they seem to be coming to

an end.

The promotion by Monitor of service-line management is

enabling hospital clinicians, for the first time in the history of the

NHS, to understand reliably the economics of the services they

deliver and also how to assess not just the clinical outcome and

safety of their services but also the views of patients and staff. This

means that clinicians have the data to take managerial responsibil-

ity for improving efficiency and effectiveness, and the incentives to

do so. And increasingly boards can have the confidence to delegate

to clinical leaders decisions on reshaping services to improve qual-

ity or efficiency, decisions on investment etc. This in turn enables

boards to spend more time on strategy and less on operational

issues that can best be settled by those delivering services.

Foundation Trusts have also been at the forefront of developing

and publishing quality reports: the so-called quality accounts. In



2009 the first reports, which dealt with performance in 2008-09

necessarily used existing data and current quality indicators.

However, for the first time boards have published their objectives

for improving quality during the following year (i.e. 2009-10) and

in their annual reports for that year they will set out what has been

achieved, and what has not. Because the reporting framework is set

by Monitor, these quality reports are not mere advertising. Their

scope may be quite limited, but they are designed to offer an honest

account.

There is now more, and more accurate, data on financial and

non-financial performance of hospitals than ever before, and its

coverage and ease of access by patients is constantly improving. But

the cultural obstacles remain, and if anything they are becoming

more robust in the face of challenge.

The policy of creating Foundation Trusts was designed to create

a new set of structural relationships within the NHS. The devel-

opment of the new structure was, amongst other things, an

attempt to create a new culture. However, the old culture – the

one that NHS managers and civil servants feel safest in – is still

dominant within the Department of Health. And sadly the current

and immediately previous Secretaries of State have acted in ways

that strengthen this out-dated and inappropriate culture, rather

than challenging it.

As explained above the public, political parties and the NHS itself

expect the Secretary of State to be responsible for everything that

takes place within the NHS. This expectation of the Secretary of

State’s responsibility for the NHS is a belief also held by many IN the

NHS itself. Legally the Secretary of State is withdrawn from this posi-

tion with regard to Foundation Trusts by the legislation passed by

Parliament in 2003. If something goes wrong inside a Foundation

Trust the Secretary of State has no legal duties or powers unless

Monitor chooses to de-authorise the Foundation Trusts using the

powers given to it in the Health Act 2009.



However, this is not how Secretaries of State or Members of

Parliament actually act. Ministers still operate as if they were

responsible for most significant operational decisions – in effect,

Group Chief Executive of a corporate hospital system.

Two of the most public examples illustrate how the reality and

the legal position are not currently aligned.

First was the row over whether Foundation Trusts should be told

by the Department of Health to deep clean wards to combat MRSA.

In September 2007 the Prime Minister decided that this was an

appropriate response to public anxiety, that hospitals might be

“dirty”. He pledged that all hospitals in the NHS would be deep

cleaned by a certain date. This may or may not have been a correct

idea to make hospitals clean, but it is clear from the Foundation

Trust legislation that he had voted for that the Prime Minister did

not have the actual power to make all Foundation Trusts do this.

He can ask them, but he cannot tell them. This did not stop the

Department of Health from expecting that the Foundation Trusts

would fall in and obey orders alongside all other hospitals that can

in fact be told what to do. But Foundation Trusts acquiesced and the

deep cleaning was carried out across the NHS estate.

Parliament also behaves as if it had not passed the legislation that

it did. They believe that the Secretary of State for Health can be

questioned on, and invited to appear before the Health Select

Committee to discuss, any aspect of the performance of hospitals,

including those – Foundation Trusts – over which he has no juris-

diction.

In mid 2009 there was a clear report that standards of care in

some parts of Mid-Staffordshire NHS Foundation Trust had fallen

well below what the public has a right to expect. The then Secretary

of State seized the opportunity to make an oral statement to

Parliament and to commission a range of enquiries, investigations

and interventions. He did so without apparently recognising that

Parliament had passed a law which did not give him the locus to do



so or the power to impose any of the resulting recommendations.

And he acted in this way despite the fact he had voted for the legis-

lation which withdraws those rights from himself. But the

Independent Inquiry went ahead, although without the statutory

powers under the Inquires Act, and its report was laid before the

Secretary of State in February 2010.

In any other organisation operating so far beyond the legal remit

would have been thoroughly criticised. But Parliament was recep-

tive itself, positively encouraging the Secretary of State to flout the

law that Parliament had passed. It wanted to revert to the familiar

assumption that healthcare and the NHS are subject to detailed

political control and demanded that Parliament was regularly

updated by the very office holder from whom Parliament had with-

drawn the right to do anything.

In a crisis, or when pursuing an objective they regard as politi-

cally important, Ministers and Parliament still assume that that the

only approach is to exert managerial authority and issue instruc-

tions. The pressure to ‘do something’; even

when you don’t have the power to ‘do some-

thing’ seems to be irresistible to Ministers

and Parliament.

This means that it is irresistible to the offi-

cials in the Department of Health. They could

say to the Secretary of State that they are

sorry but legally the law that Parliament

passed means that all the Secretary of State can say in a statement to

Parliament is that this is shocking and a number of other organisa-

tion have this in hand and will report in due course. But their

culture is also one where they feel they ‘should’ be in charge so act

as if they are.

What the Secretary of State is entitled to do is to ask why

commissioners are spending taxpayers’ money buying poor quality

care from apparently badly-run or dirty hospitals. In the reformed


““The pressure to ‘dosomething’; even when youdon’t have the power to ‘dosomething’ seems to beirresistible to Ministers andParliament””


system the Secretary of State is the patient’s friend, not the chief

bureaucrat. His job is to ensure that commissioners buy the most

cost- and clinically-effective care to meets the needs of the commu-

nity that the commissioner serves, that the commissioner knows

what is being delivered and tackles a provider offering unacceptably

poor care. How service deficiencies are remedied is a matter for the

provider.

If the commissioner can’t or won’t get better value for money,

the Secretary of State has the powers to change the commissioner.

The Secretary of State, working through the Strategic Health

Authority (SHA) has the power – and the duty – to regulate

commissioning. However, although enquiries may be made into

the performance of a commissioner, neither the Department of

Health nor the SHAs have created a risk-based national system of

regulation for commissioning to match the regulatory framework

within which Foundation Trusts operate. This is long overdue. Not

only would it drive forward the development of commissioning,

but it would begin the process of culture change that is so essential

for the future of healthcare in England.

So far in England no serious attempt has been made to recast in

this way the relationship between Government and the healthcare

system. Culture is still eating strategy for breakfast – more slowly

that in the past, and with occasional bouts of indigestion. The ques-

tion is: how can we finally turn the tables so that strategy defines

culture?



6. Towards a new culture

Five key changes must happen if we are to have any chance of creat-

ing the culture that is needed in Government to enable autonomy

to flourish and with it creativity and innovation.

Developing real competitionFirst, true competition needs to be made a real part of the system,

so that competitive pressures are brought to bear on managers and

clinicians in order to incentivise them to improve safety, quality and

the responsiveness of the services they offer. This competition needs

to be between NHS providers and between providers from other

sectors. The speech to the King’s Fund by Andy Burnham on 17

September 2009 – in which he stated that NHS organisations

should be the preferred provider of State healthcare services – and

consequent referral of that policy to the NHS competition and co-

operation panel has left the policy entirely unclear. If Andy

Burnham’s personal preference were to become the practice of

every NHS commissioner, no NHS provider would feel under any

competitive pressure to improve. They would know that the

else.

As far as the Secretary of State’s personal preference for NHS

providers, no longer are commissioners expected to commission

the best quality that the tariff price can buy. The switch to the NHS

as the ‘preferred provider’ places the maintenance of existing serv-

ices and buildings above the best interests of patients and gives

mediocre clinicians and managers cause to hope that they will be

allowed to continue as before with no real threat.


commissioner would have to buy healthcare from them and no one

Even before this, competition was often no more than piecemeal

tendering of parts of services.

A proper policy framework is needed that enables high-quality

providers, who can deliver services to the standards specified by

commissioners within the tariff price, to be able to enter the market

and displace services of poorer quality. Ministers should see them-

selves as the ‘patient’s friend’ commissioning top-quality services

on their behalf and driving out mediocrity, rather than, as now, the

guardians of the status quo.

Developing a pricing framework that drives changeSecond, the tariff should start to be used to drive change. The

potential of a national tariff has not been remotely explored.

Properly used, the tariff could define what the Government

proposes to spend on different components of a care pathway,

rather than simply reflecting average costs of various treatments as

it does now. The tariff could make clear what constitutes, say, upper

quartile performance (quality and cost) and offer real incentives to

providers to achieve this level of performance and efficiency. And,

by defining tariffs for care pathways rather than individual

Healthcare Resource Groups (HRGs – groups of similar treat-

ments), the Government could indicate where it sees a need to

invest in improvement to secure better care for particular categories

of patient.

Used in this way the tariff could drive change and innovation

and identify those providers incapable of meeting the high stan-

dards required to sell services to the NHS. Instead, the Operating

Framework for 2010-11 gives the SHAs the ability to set aside the

tariff and “temporarily suspend contractual arrangements between

PCTs and providers.” In effect, the policy of a national tariff is

progressively being abandoned. SHAs are being allowed to decide

how much surplus a particular hospital will be allowed to make by



turning the tariff off and on. This removes the discipline of the tariff

from those hospitals that are precisely those that need to have that

discipline. Instead of penalising SHAs for not being able to commis-

sion effectively within the tariff, they are being allowed to pass to

providers all the risks associated with the tariff.

To achieve its full potential for improving services, the system for

setting the tariff needs to be independent of political manipulation

and properly resourced. Instead of being a technical backwater of

a Government department where careers are made in policy devel-

opment and implementation, the system needs an independent

organisation devoted solely to structuring a tariff within a defined

envelope of public expenditure and staffed by technical experts

with experience in the wide range of tariff-based systems around

the world. And the tariff should be made to stick, and not be subject

to local manipulation by SHAs.

General elections are not won or lost on such proposals, but their

importance to the development of a high-quality healthcare system

cannot be over-stated.

Foundation Trusts believing in and using the autonomythat they haveThird, NHS healthcare providers need to begin to relish their auton-

omy and to use it to develop their institutions. It is increasingly

recognised that some NHS Trusts are intrinsically weak organisa-

tions, unlikely ever to be strong enough to be granted the

autonomy of being authorised as a Foundation Trust. There can be

many reasons for this: poor leadership or management; small scale

creating a cost base incommensurate with any realistic income;

inappropriate reconfigurations in the past creating organisations

with no strong identity or culture. Foundation Trusts should see

opportunities here. They know the risks they can take and those they

can’t. Service line management has given them an understanding of

Towards a new culture | 47


the economics of the services they provide and an ability to assess

the consequences of expanding services or adding new ones.

Foundation Trusts ought to be well-placed to acquire weak

providers and turn them into successes, and in the process build

chains of strong institutions and services that are capable of resist-

ing central control and rising above the pressures this seeks to exert.

But so far these changes have been slow to

emerge. Only one real take over has occurred

where the Heart of England hospital took

over Good Hope hospital. This must and will

become a feature of the hospital landscape in

the next few years.

A key requirement for the development of

local autonomy is its exercise. Too often

Foundation Trusts – especially those who are

under-performing – are very ready to let

Ministers and their officials step over the line

and try to take back control. Too often

Foundation Trusts feel they have to be included in the SHAs

attempts to performance manage the NHS. Too often they feel that

when they are told to by an SHA or the DH they have to agree to

take someone from their Board to prop up another non-Foundation

Tust hospital. This isn’t to say that Foundation Trusts should not

engage with the other components of the NHS. Of course they

should where doing so helps them improve the services they

deliver. But they should do so as the equal partners the legislation

describes, not as subsidiaries.

An industry, not an organisation or a system In parallel with this – the fourth change that is needed – is for

the provider sector to behave more like the industry it is. In the

wider economy competitors have learned to co-operate to


““Foundation Trusts ought tobe well-placed to acquire weakproviders and turn them intosuccesses, and in the processbuild chains of stronginstitutions and services thatare capable of resisting centralcontrol and rising above thepressures this seeks to exert””


strengthen the industry in which they operate and advance its

interests. In some cases this is mainly through trade bodies. In

other cases joint ventures are created to take forward industry-

wide initiatives.

Too often in healthcare this is still left to Government and the

assumption is that this is where cooperative activity belongs. So, the

National Leadership Council drives initiatives to help young

managers and clinicians acquire the skills and exposure they need

to progress to the most senior levels. In the process it expands into

board development initiatives and schemes to identify likely candi-

dates for what it defines as the most challenging roles. All of this the

industry itself could do, and do better. Instead of letting the

Department of Health reinforce its notion of itself as the headquar-

ters of the NHS, the healthcare industry should be creating the

structures to cooperate on devising and delivering the programmes

it believes it requires, not passively accepting what is offered up by

‘the centre’.

Developing real power of the payors Finally, and perhaps most importantly, commissioning needs to

develop into the local driving force of service improvement, chal-

lenging providers to be more efficient and effective and to meet the

needs of patients in the most clinically- and cost-effective way.

Commissioning isn’t simply a funding mechanism. Commissioners

need to develop different ways of assessing the real needs of the

populations they serve, and effective methods to ensure that real

needs are met and demand is properly managed. Above all,

commissioners need to embrace the concept of being the patients’

friend.

Their role isn’t to protect their local hospital, simply to exist in

its present form. If the hospital is uneconomic the chances are the

service quality may be poor. The job of the commissioner is to

Towards a new culture | 49


negotiate with providers what should and can be delivered in

hospital and what can best be delivered elsewhere – in the commu-

nity, or in a different secondary care provider – and then ensure that

this happens.

Commissioners should never be satisfied. There is always room to

improve quality or achieve better value. How that is done is for the

providers. But the commissioners have a legitimate role in ensuring

that quality and value constantly improve. If the existing provider

can’t or won’t improve, the effective use of competition will enable

new providers to show what they can do for patients.

To be most effective, commissioners and providers have to work

together closely, as happens between suppliers and purchasers in

other similar industries. But the relationship needs to have a strong

element of effective challenge by the commissioners, if the needs

of patients are to be met in the most effective way. Foundation

Trusts may not like it, but it was never the intention of the policy

to featherbed them.

ConclusionThe policy framework is right as is the service architecture.

Resourcing is historically high (although the next few years will be

difficult). But still the old culture of centralised control remains the

dominant force and with it comes the politicisation of decisions

and the undermining of the autonomy that is essential for change

and innovation.

The only part of the system that has scarcely changed in 60 years

in the Department of Health, itself the source of so many reorgan-

isations of the rest of the system. The time has come for it to

reinvent itself as the driver of change through commissioning not

management. Can it seize the opportunity?



Future FoundationsTowards a new culture in the NHS

By Bill Moyes and Paul CorriganEdited by Henry Featherstone

£10.00ISBN: 978-1-906037-71-4

Policy ExchangeClutha House10 Storey’s GateLondon SW1P 3AY


Policy Exchange

Future Foundations: towards a new

culture in the NH

S

Given its importance healthcare in England has

inevitably been the object of reform of different

ways of organising, funding and managing

hospital, community and primary care services.

But are Government Ministers the best people

to run the NHS? And should Parliament seek to

hold Ministers to account for every last detail of

healthcare provided in each and every hospital in

every Parliamentary constituency?

The policy of creating Foundation Trusts was

designed to create a new set of structural

relationships within the NHS. The development of

the new structure was, amongst other things, an

attempt to create a new culture. But the old culture

of tight central control – the one that NHS managers

and civil servants feel safest in - still remains

dominant within the Department of Health.

In this pamphlet, Bill Moyes and Paul Corrigan, the

architects of Foundation Trusts, argue that the NHS

needs to adopt more of the changes that allowed

Foundation Trusts to flourish. They suggest 5 key

changes that must happen if we are to have any

chance of creating the culture that is needed in

Government to enable autonomy to flourish, and

with it creativity and innovation.

Future Foundations: towards a new culture in the NHS

Documents

Transcript of Future Foundations: towards a new culture in the NHS